Category Archives: Business Advice

Steps To Consider Before Your Startup Issues Stock

stocksIt’s inevitable that start ups will think of issuing stock at one point or another. However, there are some things they need to research and make sure they complete, before they can take the next steps towards stock sales. First and foremost, startups need to seek the approval of the Board of Directors in order to take any steps regarding stocks. In order to achieve the official approval of the Board of Directors, startup executives need to suggest the resolution in a board meeting, or request written consent from the Board of Directors. The board will also have to approve the agreements, in terms of any sales of stocks, and if the startup needs to file any relative government documents, the Board is also in charge of approving these.

The second, but also a very important step a startup needs to take is to seek the approval of the actual shareholders. Usually, a majority needs to vote in favor of the approval of stock share issuance in any agreement. The startup will be responsible for reviewing the Articles of Incorporation or the Certificate of Incorporation of their company. This is mainly to ensure that they actually do have the approval and enough shares, to continue with a new sale of shares. Legally, they will also be responsible for complying with Security laws. While this is considered one of the later steps, is very important to ensure that you’ve been in compliance of the security laws before you actually offer the sale of stocks to anyone else.

 

secDocumentation is everything, always keep a written consent of the Board of Directors’ approval of the sale of stock, as well as a written consent of the shareholders approval. Documents that should also be kept in that same category are the agreement contracts.  Important documents to also keep track of, are the stock certificates. This needs to be provided every time a sale of stock takes effect. Keep in mind, that the following must be completed correctly for each of the stock certificates:

  • This certificate must be dated
  • Number pages for the certificates and the socks
  • *Do not forget to request the signature of an approved executive of the corporation on the stock certificates
  • Keep a copy of every single stock certificate

Make sure that the company’s stock ledger reflects accurately with the issuance of any new stocks. Finally, it is expected that a startup, corporation or enterprise file the appropriate forms with the Securities Exchange Commission, commonly referred to as the SEC, and any other forms required by the state, within 15 days of each sale.

ORIGINAL ARTICLE ON MY COLUMN ON RIGHTSTARTUPS HERE

© C. J. Leger November 23, 2014

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4 Key Personalities Needed To Found Startups

Many people have the misconception that if they have a great idea, they will become the next Mark Zuckerberg, with a multibillion dollar company. This is often referred to as Zuckerberg syndrome. However, the reality is that this is not an average outcome from a startup.

Many founders are reluctant to come to terms with this, and they often drive their startups into the ground waiting out for the “bid acquisition” or breakthrough. Realistically speaking, there are tons of social networks, to use this genre as a specific. There are really only two founders that have made billions; Mark Zuckerberg from Facebook and David Karp from Tumblr. The latter only made $1.1 billion from its acquisition to Yahoo.

Founders

A startup needs a founder that understands clearly, that although they have a great idea, they may not make it as big as Zuckerberg did. This founder needs to be very realistic about their options as well; consult with the rest of the team and make sure that they may not make as much as they want, and gear towards an exit by acquisition if its more lucrative. Many founders believe in their project until the end, and reject selling options only to end up with nada.

This does not suggest that founders should not believe in their products or projects, but be realistic about them. Also, there are two types of founders. Those that are in it for a profit, and those that are in it for a profit, and genuinely are passionate about the project.

The first of these two, will look to sell to the highest bidder. And that’s okay if that’s what the team is aiming for. The latter of the two, will try to sell to a company that will see the project to its highest level of fruition; even if that means taking less money for it.

And as many startups have more than one founder, the initial team needs to ensure they know who their founders are, and that they are all on the same page.

CEOs

Ah, the CEO. Many founders again make the mistake of thinking that they are entitled to be CEO, because they thought of the idea. This could not be further from the truth. A responsible founder will appoint a person that can bring talent into the company and make people want to be a part of the project; including investors. The founder is not always qualified to do this job.

There are usually two types of CEOs needed:

  • The initial stage CEO
  • The progressive stage CEO

The first of the two, is the person appointed during the initial stages of the startup, to raise capital and expand their talent base.

The second type of CEO is usually appointed after the startup has reached their first stage of comfortable funding and a solid team, if the initial CEO does not stay in place. Sometimes the first CEO can stay on and continue the job; but when they don’t, then the new person comes on to breed the progression of the startup. Their job is to expand services, more talent, and partnerships and bring the startup to full company level.

Developer

Every tech startup needs a qualified founding developer that can code like a guru and build up a solid product. This person can be one of the founders that happens to be a coder, however, unless the founder is immaculate at his or her job, they should not be the sole founding developer.

The whole purpose of this concept is for founders to come to terms with the concept that they should not be the “founding person” for any particular job, just because they founded the company, unless they fit the qualified criteria. This does not mean that they should be left out. Instead they can view it as every person has a place and a job to do.

  • Let the developer code
  • Let the CEO be lively and draw attention to the company
  • And let the founders have a solid concept of the product THEY’D like to see, and relay that to the rest of the team.

Essentially the founder is needed, to tell the CEO what to market, and to give the developer an idea of what they want; otherwise they’re flying blind; so be a good captain, if you can’t be anything else. Do not try to be a bird if you know you have a broken wing and can’t fly as well as another bird can.

Designer

The designer is needed to design a product interface based upon what the customers may want to see. The developer needs their guidance, and the designer needs the founders’ guidance. The CEO can then present the finished product.

The 5 Reasons Most Startups Fail

It seems like for every business that succeeds, there are 10,000 that fail. This is a problem seen on a global scale. Most startups want to be the next Facebook or Microsoft, but don’t execute their plan properly. However, startups can avoid this type of negative statistic by ensuring that they plan their launch successfully. For the most part, in my past legal and business experience, I’ve seen that there are five major reasons why startups fail.

Growth 

The first reason being rapid growth. While growth is good, and inevitable in the future of any company and the core of startups, growing too fast can lead to disaster. Startups need to make sure that they have a good grasp on their customer base and the market that they’re currently in  before they move into new markets. It’s advisable to have strong understanding of the current market for a few years before moving into unknown territory.  This can lead to unpreparedness, and a failure in two markets. It is More logical to succeed in just one market, rather than fail in two, in the initial stages of the startup’s life.

Finances

As I stated in one of my other pieces, regarding appointing the right people for executive positions within a start up, often, startups feel that a founder can do all of the work of various executives. However, when it comes to finances; unless the founder is a talented accountant, they should enlist the services of a professional before they jump in over their heads. The biggest problem among startups is the fact that they cannot track their finances properly, and they overspend every dime that they make.

There needs to be a level of control and a department dedicated solely to the finances of the start up, above anything else.  An important item is a Budget;something thats vital to businesses that they can plan for on their end. Start ups should keep accurate records of all of the money that comes into the start up, and all of the money that regularly goes out in expenses before jumping into large purchases. Also, the cost of running a business fluctuates over the years. It is a vital step for start ups to establish a reserve fund, which can support the rising costs of utilities, materials and even salary wages.

Location

For every business, regardless of the space they’re in, location is the key to either success or failure. Most startups tend to jump immediately into renting office space that’s the cheapest, or the first

available. This is a very big mistake. Start ups should only open offices in relative locations, where they will have a presence in their intended markets and a flowing user base. If an office in a prime location is not available, consider running an online start up before actually launching physical offices or stores.

Premature Launch

People may sometimes wonder why banks require business plans in order to give out loans. It is the same reason why start ups should establish their own personal business plan and business model, before launching into any space. Banks want to make sure that companies are prepared, that that they have planned properly for the future, and inevitable or improbable changes that may occur. This is no different when it comes to start ups. Many startups come up with a great idea for product and immediately launched their business, before having an actual business model or business plan, or research for a profitable customer base, or location or even demographic group. This is a huge mistake!  A great product is fantastic, but if you cannot executed it properly because you lack the information in the planning, you will be finding yourself going bankrupt before even selling one unit of your product.

Marketing

Marketing is essential in the age that we live in. Startups should allot a certain amount of funds from their finances, towards adequate marketing. This department will be responsible for any television advertisements for the product, Internet advertisement of the company, interactive ads on video website and targeted website ads. Marketing can be expensive, but without it startups soon find themselves in danger.

© C. J. Leger November 16, 2014 | September 18, 2013

Original story written on Rightstartups by Author C. J. Leger
Article originally from my column on Rightstartups

The Achilles Heel of Business Owners

This week I want to start by taking about the serial killers of businesses world wide, all of which are often brought upon the entity by the owners themselves. You see, every business, successful ones mainly, have a few things in common that allow them to strive; and that’s the saying “Be and let be!”.

What does that mean? in life everyone has a role to play, and in business every executive position anchors a hierarchy. Where you are is where you are meant to be, managing the things of your realm. But if you stray and proceed to micromanage every other member of the hierarchy, you risk destabilizing order. You see, you must remove yourself from your duties in order to apply yourself to someone else’s. Every time you do this, the structural integrity of the entire pyramid begins to crumble. This is why you have hired various executives, to execute specific tasks.

Your business is your baby, but you cannot do it all yourself; so you hire others to do the things you can’t. If they are good enough to remain on your team with your supervision, they are good enough to remain on the team unsupervised after a period. Otherwise, you would not have them on your pay list, would you.

But most times business owners result to micromanaging, its because they have a vision of what something should be. And they hire people to execute this vision, however, in the exact way they see it. Which, my friends, is impossible. Every mind is unique and expecting someone to view things as you do entirely just isn’t going to happen.

Look at the most successful businesses in the world. Google for example; this company allows a significant amount of unique thinking from their employees, because they recognize that they’ve hired them for their unique set of skills, which they will apply to their job. But if you hire them for their skills, and expect them to apply your skills to your job, then why are you wasting money on their salary? You might as well do it all yourself. In other words, micromanaging is completely useless.

Expecting the World

Your employment opportunity is set to a certain degree of demand. Most employees will go above and beyond to make sure things to your benefit get done. But they still get paid the same amount for more effort; and its all to your benefit, not theirs. Offering a thankless job is not a good move, no one will stand for it, and eventually your team will move on because being your lackey just is not anyone’s life dream.

Pay VS Workload

Make sure you have a good balance. Although you are offering a quick job, something on the side, if the pay is good for the amount of work, however, there isn’t enough work, many may find it easy to jump ship. Here’s an example. John gets hired to make you 2 info graphs a week for $20 a piece. That’s a “whopping” $40 (note the sarcasm). Although $40 is good for this amount of work, if John gets invited to 4 parties that week, he’ll be very likely to skip out on work, because “what’s $40 now and days”. Get it?

Try offering John 4 info graphs per week. $80 is a lot more appealing than just $40. Yet your price per, hasn’t changed.

Finally I’ll leave you with one more thing to think about. Your life is your business, but your employees do not reap any of the extra benefits it offers to you. Therefore, your business is not their life. Do not expect it to be. No one likes a slave driver.

© C. J. Leger November 14, 2014